Although roiling markets may tempt you to sell all your stocks, refrain. Defensive investing is not about moving all or nearly all of your retirement money into cash or bonds. That may be a wise move if you're a year or two from retirement and have accumulated enough wealth to last the rest of your lifetime. But for most people, hunkering down in low-risk investments is not a particularly attractive option when bonds and money funds yield 3 percent or so (although, truth be told, even tiny returns are better than losses).

Long-term investors should keep 60 percent to 70 percent of their investments in stocks and stock funds. Recalling that stocks lost nearly half of their value in the 2000-02 bear market, which coincided with a recession, you may think we're being overly aggressive or optimistic, or both. But let's put these wobbly markets — the current one and the one earlier in the decade — in perspective. At the outset of the 2000-02 conflagration, stocks (particularly technology stocks) were in the stratosphere. But back then, you had good alternatives. Both oil and real estate, for example, were depressed. Today, by contrast, few stocks trade at absurdly high levels, and gold, energy, other commodities and even Treasury bonds look pricey.

Keep the rest of your portfolio in low-risk investments, such as a money-market account or short-term bond fund. That will provide ammunition for a bargain hunt once you get a sense that the U.S. economy is nearing a bottom, probably later this year or early in 2009. And the bargains are starting to proliferate. Recently, the Nasdaq Composite index was in bear-market territory, having dropped 20 percent from its October high; the broader Standard & Poor's 500-stock index was off 16 percent.

You should cut back on risk. Speculative stocks and junk bonds are for another time. Developing nations, such as China and Brazil, are still growing rapidly, but their stocks are dangerously expensive. Stay away from those kinds of markets until they correct. Cut out or cut down on stocks that depend on lavish U.S. consumer spending or a fast housing recovery.

The bear is growling most fiercely at companies that so much as hint that customers might be backing off. Case in point: In January, Apple (symbol AAPL) reported awesome Christmas sales and record profits for the October-December quarter, and the company introduced some flashy new products — but the stock lost 19 percent in a couple of hours. It was recently down 37 percent year-to-date. Why? Because Apple said the rest of the year would be merely good, not spectacular.

Jeffrey R. Kosnett is a senior editor at Kiplinger's Personal Finance magazine. Send your questions and comments to